CFTC advances position plan, reignites debate

WASHINGTON (Reuters) – Speculators could face curbs on wheeling and dealing in commodity markets after the U.S. futures regulator on Thursday advanced a plan to prevent the biggest traders from taking market-distorting bets.

The proposal passed 4-1 and the Commodity Futures Trading Commission will now open up the proposal for public comment, reigniting a long-simmering debate about the role banks and funds play in energy, metals and agricultural markets as prices again soar to lofty heights.

The plan would attempt to curb positions investors can hold in commodity markets, with the aim of preventing large players from controlling the market. Consumers and some lawmakers say it would prevent a run-up in prices, which hit record highs in 2008 in oil and many food staples. Prices are rising once again, which could lead to riots and food shortages in developing nations.

But the future of the plan was thrown into question after Democratic Commissioner Michael Dunn, whose support is vital for the plan to be finalized, said he wasn’t convinced the plan was needed.

“With such a lack of concrete evidence, my fear is that, at best, position limits are a cure for a disease that does not exist or at worst, a placebo for one that does,” Dunn said.

Dunn, a circumspect senior commissioner who rarely airs his personal views in public, made his first significant statements on position limits since the Dodd-Frank bank reform law was enacted in July.

Dunn voted for the plan to move forward so the agency could gather more evidence on speculation and its role in markets.

Republican Commissioner Jill Sommers voted against the plan, which she called flawed, and her fellow Republican Scott O’Malia also raised questions about it, but voted for the plan to move forward.

Asked if the CFTC has any leeway in whether it needs to adopt limits, Chairman Gary Gensler said he believes Congress wants the agency to move forward.

“I support position limits to help markets best function and that there be a diversity of market participants, and I believe it was the intent of Congress that we take this up,” Gensler told reporters.